1) JIF peanut butter is a normal good that is a complement of jelly All of the following could shift the demand curve for JIF to the left except A a decrease in income B an expected increase in the price of JIF peanut butter C an increase in the price of jelly D a decrease in the price of Peter Pan peanut butter (a substitute for JIF) 2) All of the following will shift the supply curve of frisbees to the right except A an increase in price of frisbees B an improvement in storage resulting in fewer defective frisbees C a reduction in the price of plastic from which frisbees are made D an improvement in the production of frisbees 3)The demand curve for CDs is downsloping If the price of CDs falls, this will cause the A quantity demanded to increase B demand curve to shift to the right C quantity demanded to decrease D demand curve to shift to the left 4)Firm C and Firm D have identical Total Variable Costs Firm C's Total Fixed Costs are $10,000 month higher than Firm D's This implies that Firm C's MC curve A has the same shape, but is lower than that of Firm D B is higher than that of Firm D, and need not have the same shape C is identical to that of Firm D D B has the same shape, but is higher than that of Firm D 5)The community expects its income to rise For a normal good, this would result in A an increase in demand, and a fall in price B an increase in supply, and a fall in price C an increase in demand, and a rise in price D an increase in supply, and a rise in price 6)The supply of oranges increases At the original price level, there will be a of oranges You should predict that price of oranges will A shortage decrease B surplus increase C shortage increase D surplus decrease 7)In a demand and supply diagram, equilibrium price will certainly increase if A demand and supply both decrease B demand decreases and supply increases C demand increases and supply decreases D demand and supply both increase 8)The price of beans rises sharply Which of the following cannot be true A The supply of beans may have decreased with no change in the demand for beans B The supply of beans may have increased with an increase in the quantity demanded of beans C The demand for beans may have increased with no change in the supply of beans D The demand for beans may have increased with an increase in the quantity supplied of beans 9)Along the production possibility frontier, trade offs exist because A not all production levels are productively efficient B at some levels, unemployment or inefficiency exists C buyers will want to buy less when price goes up, but producers will want to sell more D the economy has only a limited quantity of resources to allocate between competing uses 10)Monty the Monopolist is seeking to maximize profits Currently, he is producing where marginal revenue is less than marginal cost He should A decrease price B reduce production C increase production D produce where price is equal to marginal cost 11)Price elasticity of demand is 0 50 Price decreases by 10 We would predict A a 50 increase in quantity demanded B a 5 decrease in quantity demanded C a 20 decrease in quantity demanded D a 5 increase in quantity demanded 12)Marginal cost can be defined as A the change in total variable cost divided by the change in quantity produced B the value of total cost divided by the value of quantity produced C the change in average variable cost divided by the change in quantity produced D the change in average total cost divided by the change in quantity produced 13)If a natural monopoly is split into a number of smaller competing firms, price will A increase, because each smaller firm will have higher average costs B decrease, because additional competition is taking place C increase, because each firm will experience greater economies of scale D increase in the short run because of the disruption, but decrease in the long run because of the additional competition 14)In the market for labor, a wage ceiling is established above the equilibrium wage rate Unemployment will and employment will A increase increase B increase not be affected C decrease not be affected D not be affected not be affected 15)The selling of liquor is brought under the control of a single firm Relative to a perfectly competitive environment, we would expect that the monopolist would charge A lower prices and restrict output B lower prices and expand output C higher prices and expand output D higher prices and restrict output 16)The market for peas is experiencing a shortage You should predict that price will A decrease, quantity demanded will rise, and the quantity supplied will fall B increase, quantity demanded will fall, and the quantity supplied will rise C decrease, quantity demanded will fall, and the quantity supplied will rise D increase, quantity demanded will rise, and the quantity supplied will fall 17)For a monopoly, A as demand falls it may become less than marginal revenue B marginal revenue may become negative C the demand curve lies below the marginal revenue curve D demand and marginal revenue are depicted by the same downward sloping line 18)These following characteristics are shared by monopolistic competition and perfect competition in equilibrium EXCEPT A a large number of firms B marginal revenue equals marginal cost C firms sell identical products D it is easy to enter the industry 19)Consumers will become responsive and suppliers responsive to an increase in the price of Exxon gas as time passes A less more B more more C more less D less less 20)If consumers demand less than they did before of a product at each possible price, there has been A an increase in demand B a decrease in quantity demanded C an increase in quantity demanded D a decrease in demand 21)A perfectly competitive firm maximizes profit by producing where a monopoly maximizes profit by producing where A P MC P MC B P MC P MC C MR MC P MC D MR MC P MC 22)Other things equal, an increase in the demand for a product will the consumer surplus and the producer surplus A decrease increase B increase increase C increase decrease D decrease decrease 23)Vodka and gin are consumption substitutes A decrease in the supply of gin will cause the A demand for vodka to decrease B quantity demanded of vodka to increase C quantity demanded of vodka to decrease D demand for vodka to increase 24)Chuck's Chips and Debi's Dip are complements Costs of chip production fall Also, a government health study reports that dip consumption causes bone cancer For Debi's Dip, the equilibrium price will and the equilibrium quantity will Careful A be indeterminate fall B be indeterminate rise C fall be indeterminate D be indeterminate be indeterminate 25)Costs of production fall for Sarah's Salsa At the same time a government health report alleges that salsa consumption causes bone cancer For Sarah's Salsa, the equilibrium price will and the equilibrium quantity will A be indeterminate increase B be indeterminate decrease C increase be indeterminate D decrease be indeterminate 26)The presence of each of the following is a source of market failure except A public goods B lack of control by individual firms over price C spillover benefits D externalities 27)The price of Pepsi decreases because the supply of Pepsi has increased This will cause A a decrease in the demand for Coke (a substitute for Pepsi) B an increase in the demand for Pepsi C a decrease in the demand for Pepsi D an increase in the demand for Coke (a substitute for Pepsi) 28)Movements along the production possibility frontier illustrate A changes in the resource mix B the concept of opportunity cost C the operation of market forces D improvements in technology 29)The income elasticity of demand coefficient of Good A is positive, and the cross price elasticity of demand between Good A and Good B is positive Good A is a(n) A normal good and a substitute for Good B B inferior good and a complement for Good B C inferior good and a substitute for Good B D normal good and a complement for Good B 30)Greaseboro's local coffeehouse The Daily Grind cut the price of coffee and doughnuts by 6 and raised the number of servings sold The Daily Grind's total revenue on coffee and doughnuts has risen by 3 This information shows that A coffee and doughnuts are a normal good B the price elasticity of demand for coffee and doughnuts is 2 0 C the demand schedule for coffee and doughnuts at The Daily Grind is horizontal D at present, prices are in the elastic section of the demand schedule 31)An exception to the conclusion that competitive markets are the most allocatively efficient markets is that of the A monopoly that is earning short run economic profits B monopoly that is earning long run economic profits C monopoly that does not practice price discrimination D natural monopoly 32)The wheat industry is perfectly competitive and is in long run equilibrium Which statement best describes the short run effects of a decrease in the demand for wheat The price of wheat will quantity traded will the output of the typical farmer will A increase increase increase B decrease decrease decrease C increase increase decrease D decrease decrease increase 33)Which of the following indicates that we have an allocatively efficient market A Marginal utility of the product is greater than the price of the product B Price of the product exceeds the marginal revenue of the product C Price of the product equals the marginal social cost of the product D Wage equals marginal product of labor 34)In medieval Europe, fairs developed where individuals would bring goods to trade Assuming that there are no barriers to trade, trading would continue until A the opportunity cost of the next possible trade was zero for all participants B all participants had identical bundles of goods C all participants had received equal gains D each participant believed that no additional trade would make him better off 35)With a population of aging baby boomers, there is an increase in the demand for Gro Againe, a lotion that prevents thinning hair Which one of the following is a true statement A After the increase in demand, the price of Gro Againe will increase As price rises, demand will fall, resulting in a surplus B After the increase in demand, price will increase, because a shortage is present in the market The higher price will allow the producer to hire additional resources C After the increase in demand, the price of Gro Againe will decrease This will cause some buyers to switch to substitutes D After the increase in demand, the opportunity cost of using resources in alternative lines of production has decreased and output of Gro Againe will increase 36)Which of the following best explains why the marginal revenue that perfectly competitive Farmer Gustafson receives from an additional bushel of wheat is constant and equal to its price A In the short run no new firms can enter this industry B There are few close substitutes for wheat and many buyers eager to purchase C Gustafson's wheat is identical to that of other farmers and is an insignificant fraction of the total market supply of wheat D The market demand curve for wheat is downward sloping and the market supply curve is upward sloping

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1) JIF peanut butter is a normal good that is a complement of jelly. All of the following could shift the demand curve for JIF

1) JIF peanut butter is a normal good that is a complement of jelly. All of the following could shift the demand curve for JIF to the left except

A.a decrease in income.
B.an expected increase in the price of JIF peanut butter.
C.an increase in the price of jelly.
D.a decrease in the price of Peter Pan peanut butter (a substitute for JIF).

2) All of the following will shift the supply curve of frisbees to the right except

A.an increase in price of frisbees.
B.an improvement in storage resulting in fewer defective frisbees.
C.a reduction in the price of plastic from which frisbees are made.
D.an improvement in the production of frisbees.

3)The demand curve for CDs is downsloping. If the price of CDs falls, this will cause the

A.quantity demanded to increase.
B.demand curve to shift to the right.
C.quantity demanded to decrease.
D.demand curve to shift to the left.

4)Firm C and Firm D have identical Total Variable Costs. Firm C's Total Fixed Costs are $10,000/month higher than Firm D's. This implies that Firm C's MC curve

A.has the same shape, but is lower than that of Firm D.
B.is higher than that of Firm D, and need not have the same shape.
C.is identical to that of Firm D.
D.B. has the same shape, but is higher than that of Firm D.

5)The community expects its income to rise. For a normal good, this would result in

A.an increase in demand, and a fall in price.
B.an increase in supply, and a fall in price.
C.an increase in demand, and a rise in price.
D.an increase in supply, and a rise in price.

6)The supply of oranges increases. At the original price level, there will be a _________ of oranges. You should predict that price of oranges will __________.

A.shortage; decrease
B.surplus; increase
C.shortage; increase
D.surplus; decrease

7)In a demand and supply diagram, equilibrium price will certainly increase if

A.demand and supply both decrease.
B.demand decreases and supply increases.
C.demand increases and supply decreases.
D.demand and supply both increase.

8)The price of beans rises sharply. Which of the following cannot be true?

A.The supply of beans may have decreased with no change in the demand for beans.
B.The supply of beans may have increased with an increase in the quantity demanded of beans.
C.The demand for beans may have increased with no change in the supply of beans.
D.The demand for beans may have increased with an increase in the quantity supplied of beans.

9)Along the production possibility frontier, trade-offs exist because

A.not all production levels are productively efficient.
B.at some levels, unemployment or inefficiency exists.
C.buyers will want to buy less when price goes up, but producers will want to sell more.
D.the economy has only a limited quantity of resources to allocate between competing uses.

10)Monty the Monopolist is seeking to maximize profits. Currently, he is producing where marginal revenue is less than marginal cost. He should

A.decrease price.
B.reduce production.
C.increase production.
D.produce where price is equal to marginal cost.

11)Price elasticity of demand is 0.50. Price decreases by 10%. We would predict

A.a 50% increase in quantity demanded.
B.a 5% decrease in quantity demanded.
C.a 20% decrease in quantity demanded.
D.a 5% increase in quantity demanded.

12)Marginal cost can be defined as

A.the change in total variable cost divided by the change in quantity produced.
B.the value of total cost divided by the value of quantity produced.
C.the change in average variable cost divided by the change in quantity produced.
D.the change in average total cost divided by the change in quantity produced.

13)If a natural monopoly is split into a number of smaller competing firms, price will

A.increase, because each smaller firm will have higher average costs.
B.decrease, because additional competition is taking place.
C.increase, because each firm will experience greater economies of scale.
D.increase in the short run because of the disruption, but decrease in the long run because of the additional competition.

14)In the market for labor, a wage ceiling is established above the equilibrium wage rate. Unemployment will __________ and employment will ___________.

A.increase; increase
B.increase; not be affected
C.decrease; not be affected
D.not be affected; not be affected

15)The selling of liquor is brought under the control of a single firm. Relative to a perfectly competitive environment, we would expect that the monopolist would charge

A.lower prices and restrict output.
B.lower prices and expand output.
C.higher prices and expand output.
D.higher prices and restrict output.

16)The market for peas is experiencing a shortage. You should predict that price will

A.decrease, quantity demanded will rise, and the quantity supplied will fall.
B.increase, quantity demanded will fall, and the quantity supplied will rise.
C.decrease, quantity demanded will fall, and the quantity supplied will rise.
D.increase, quantity demanded will rise, and the quantity supplied will fall.

17)For a monopoly,

A.as demand falls it may become less than marginal revenue.
B.marginal revenue may become negative.
C.the demand curve lies below the marginal revenue curve.
D.demand and marginal revenue are depicted by the same downward-sloping line.

18)These following characteristics are shared by monopolistic competition and perfect competition in equilibrium EXCEPT

A.a large number of firms.
B.marginal revenue equals marginal cost.
C.firms sell identical products.
D.it is easy to enter the industry.

19)Consumers will become __________ responsive and suppliers ________ responsive to an increase in the price of Exxon gas as time passes.

A.less; more
B.more; more
C.more; less
D.less; less

20)If consumers demand less than they did before of a product at each possible price, there has been

A.an increase in demand.
B.a decrease in quantity demanded.
C.an increase in quantity demanded.
D.a decrease in demand.

21)A perfectly competitive firm maximizes profit by producing where __________; a monopoly maximizes profit by producing where __________.

A.P = MC; P > MC
B.P = MC; P = MC
C.MR = MC; P < MC
D.MR = MC; P = MC

22)Other things equal, an increase in the demand for a product will _________ the consumer surplus and _________ the producer surplus.

A.decrease; increase
B.increase; increase
C.increase; decrease
D.decrease; decrease

23)Vodka and gin are consumption substitutes. A decrease in the supply of gin will cause the

A.demand for vodka to decrease.
B.quantity demanded of vodka to increase.
C.quantity demanded of vodka to decrease.
D.demand for vodka to increase.

24)Chuck's Chips and Debi's Dip are complements. Costs of chip production fall. Also, a government health study reports that dip consumption causes bone cancer. For Debi's Dip, the equilibrium price will _______ and the equilibrium quantity will _______. [Careful!]

A.be indeterminate; fall
B.be indeterminate; rise
C.fall; be indeterminate
D.be indeterminate; be indeterminate

25)Costs of production fall for Sarah's Salsa. At the same time a government health report alleges that salsa consumption causes bone cancer. For Sarah's Salsa, the equilibrium price will __________ and the equilibrium quantity will __________.

A.be indeterminate; increase
B.be indeterminate; decrease
C.increase; be indeterminate
D.decrease; be indeterminate

26)The presence of each of the following is a source of market failure except

A.public goods.
B.lack of control by individual firms over price.
C.spillover benefits.
D.externalities.

27)The price of Pepsi decreases because the supply of Pepsi has increased. This will cause

A.a decrease in the demand for Coke (a substitute for Pepsi).
B.an increase in the demand for Pepsi.
C.a decrease in the demand for Pepsi.
D.an increase in the demand for Coke (a substitute for Pepsi).

28)Movements along the production possibility frontier illustrate

A.changes in the resource mix.
B.the concept of opportunity cost.
C.the operation of market forces.
D.improvements in technology.

29)The income elasticity of demand coefficient of Good A is positive, and the cross-price elasticity of demand between Good A and Good B is positive. Good A is a(n)

A.normal good and a substitute for Good B.
B.inferior good and a complement for Good B.
C.inferior good and a substitute for Good B.
D.normal good and a complement for Good B.

30)Greaseboro's local coffeehouse The Daily Grind cut the price of coffee and doughnuts by 6% and raised the number of servings sold. The Daily Grind's total revenue on coffee and doughnuts has risen by 3%. This information shows that

A.coffee and doughnuts are a normal good.
B.the price elasticity of demand for coffee and doughnuts is 2.0.
C.the demand schedule for coffee and doughnuts at The Daily Grind is horizontal.
D.at present, prices are in the elastic section of the demand schedule.

31)An exception to the conclusion that competitive markets are the most allocatively efficient markets is that of the

A.monopoly that is earning short-run economic profits.
B.monopoly that is earning long-run economic profits.
C.monopoly that does not practice price discrimination.
D.natural monopoly.

32)The wheat industry is perfectly competitive and is in long-run equilibrium. Which statement best describes the short-run effects of a decrease in the demand for wheat? The price of wheat will _______; quantity traded will _______; the output of the typical farmer will _______.

A.increase; increase; increase
B.decrease; decrease; decrease
C.increase; increase; decrease
D.decrease; decrease; increase

33)Which of the following indicates that we have an allocatively efficient market?

A.Marginal utility of the product is greater than the price of the product.
B.Price of the product exceeds the marginal revenue of the product.
C.Price of the product equals the marginal social cost of the product.
D.Wage equals marginal product of labor.

34)In medieval Europe, fairs developed where individuals would bring goods to trade. Assuming that there are no barriers to trade, trading would continue until

A.the opportunity cost of the next possible trade was zero for all participants.
B.all participants had identical bundles of goods.
C.all participants had received equal gains.
D.each participant believed that no additional trade would make him better off.

35)With a population of aging baby-boomers, there is an increase in the demand for Gro-Againe, a lotion that prevents thinning hair. Which one of the following is a true statement?

A.After the increase in demand, the price of Gro-Againe will increase. As price rises, demand will fall, resulting in a surplus.
B.After the increase in demand, price will increase, because a shortage is present in the market. The higher price will allow the producer to hire additional resources.
C.After the increase in demand, the price of Gro-Againe will decrease. This will cause some buyers to switch to substitutes.
D.After the increase in demand, the opportunity cost of using resources in alternative lines of production has decreased and output of Gro-Againe will increase.

36)Which of the following best explains why the marginal revenue that perfectly competitive Farmer Gustafson receives from an additional bushel of wheat is constant and equal to its price?

A.In the short run no new firms can enter this industry.
B.There are few close substitutes for wheat and many buyers eager to purchase.
C.Gustafson's wheat is identical to that of other farmers and is an insignificant fraction of the total market supply of wheat.
D.The market demand curve for wheat is downward-sloping and the market supply curve is upward-sloping.